Alarum Technologies Ltd (ALAR) 2024 Q1 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Alarum Technologies first quarter of 2024 corporate update conference call.

(Operator Instructions) This conference is being recorded today, May 21, 2024.

Before we get started, I will read a disclaimer about forward-looking statements.

This conference call may contain in addition to historical information, forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws.

Forward-looking statements include statements about plans, objectives, goals, strategies, future events of performance and underlying assumptions and other statements that are different than historical facts.

These forward-looking statements are based on current management expectations are subject to risks and uncertainties that may result in expectations not being realized and may cause actual outcomes to differ materially from expectations reflected in these forward-looking statements.

Potential risks and uncertainties include those discussed under the heading Risk Factors in Alarms, annual report on Form 20-F filed with the Securities and Exchange Commission on March 14, 2024, in any subsequent filings with the SEC.

All such forward-looking statements, whether written or oral made on behalf of the company are expressly qualified by these cautionary statements such forward-looking statements are subject to risks and uncertainties, and we caution you to not place undue reliance on these.

At this time, I'd like to turn the call over to Shachar Daniel, the company's CEO.

The floor is yours.

Thank you very much, and welcome, everyone to Alarum Technologies first quarter of 2024 earnings results conference call.

As is customary with me is Shai Avnit, our Chief Financial Officer.

In this call, I would like to provide a brief review of our business operations, summarize our accomplishments and then turn the call over to Shai, who will briefly discuss the financial results of the first quarter of 2024, before we will open the call to questions.

We are extremely proud to present our first quarter resilience, demonstrating continued growth and successful execution in every aspect of our business trends that continue with us into the second quarter.

We started 2024 recording strong sales months resulted in our highest revenues to date.

Net revenues for the first quarter of 2024 totaled to $8.1 million, reflecting growth of 139% year-over-year compared to the first quarter of 2023.

The strong momentum is also demonstrated in our net retention rate NRR.

NRR represents the average growth rate preceding four quarters combo compared to the equivalent period a year earlier of current customers only without the revenues generated from new customers, but including up-sells and cross-sells on one hand and churn on the hand.

In the first quarter of 2024, our NRR client to 1.66. In addition, the first quarter marked the rollout of our previously announced growth engines with the launch of our innovative products, the Website Unblocker following our initial product the SERP API.

Already in use by customers, the Website Unblocker achieved several key goals.

First, it enabled us to cross-sell new products to our existing customers.

Second, it's advancing innovation attracts the way we see inbound requests for new customers, expanding our customer base.

Lastly, we receive positive feedback from our customers, which is crucial to our reputation and our ability to deliver top of the line products and solutions.

During the first quarter, we announced the launch of our revolutionary AI data collector product line.

This cutting edge project line represents significant leap forward in data collection technology, addressing the challenges of time intensive collector creation and maintenance that if long collect business across industries.

We believe the AI data collector product line will be one of our growth engines for the upcoming years.

It's an important milestone investments towards move towards securing its share of the data collecting market and will disrupt current web data collection metals and allow users to scrape the Internet data payload to the specific requirements in intuitive no-code interface.

The new AI data collector will enable users to effortlessly generate data collection within minutes from any source without the need to invest and develop it in developing designated data collectors for each websites.

Beyond the value to customers seeking large-scale data for multiple sources, the value for the company is significant as we would have the capacity to automatically develop and create dozens or even hundreds of new square

[footage].

One of the primary drivers of the data collection market is the resurgence of AI based solutions.

In the past two years, countless new AI products have been introduced and widely expected this to shares a common requirement in order to deliver solid results, all AI base product market access to massive amounts of real-time data with minimal levels.

As such, we continue to invest in our fast, robust and reliable network, constantly expanding and enhancing its capabilities to meet the increased demand for data by the AI product.

Our dedication to expand our business with innovation and strong value propositions resulted in a record grounded in a record quarter with $8.4 million in revenues and adjusted EBITDA for spending $3.2 million growing significantly compared to the first quarter of 2023.

In the first quarter, we presented in IFRS net profit of $1.4 million compared to a net loss in the same period of 2023, and our non-IFRS net profit increased to $2.8 million.

The main difference between the two figures is following the sharp rise on the company's share price with to book non-cash expenses resulting from the fair value increase of old warrants issued in 2019 and 2020 at the amount of approximately $800,000.

Before going further, I would like to turn the call over to Shai, to discuss the financials for the quarter in more details.

Shai?

Thank you, Shachar.

As I discuss our first quarter 2024 financial results, we'll be making comparison through the first quarter of 2023, unless otherwise stated.

Revenue for Q1 2024 totaled $8.4 million, up approximately 47% over the $5.7 million generated in the first quarter of 2023.

The 2024 first quarter revenues, we're driven by a sharp growth in NetNut's revenues, which more than doubled compared to last year.

And despite our strategic decision to scale down the consumer business that led to a material decrease in CyberKick's revenues from $2.3 million in 2023 to only $0.3 million in the first quarter of 2024.

Gross profit increased to $6.5 million, up 75% from $3.7 million in the year ago period, driven primarily by increased efficiency of resources in the enterprise business and the scale down strategy of CyberKick's operations, all resulting in a reduction in our cost of revenues.

This resulted in a gross margin as a percentage of revenue of 78% compared to 66% only in Q1 2023.

Our Q1 2024 operating expenses decreased 6% year over year to $4 million, down from $4.2 million in Q1 2023.

This improvement was driven primarily by reduced costs in the consumer business, partially offset by increased cost in the enterprise business.

I would like to draw your attention to a material non-cash expense within our finance expenses line, which had a significant impact on our IFRS net profit.

In the first quarter of 2024, we booked $0.8 million of noncash expenses resulting from the fair value increase of old warrants issued in 2019 and 2020 due to the recent rise in the company's share price.

These warrants, which primarily are out of the money, and I expect that to expire in 2025 are booked in our balance sheet as a liability that fluctuates up and down based on the company's share price following the sharp rise of the share price, the economic value increased resulting in these non-cash expenses.

Also we could in the first quarter of 2024 for net tax payment for the first time in the amount of $0.4 million NetNut became profitable for tax purposes.

NetNut is entitled to a low tax percentage of 12% only on its taxable income compared to a regular 23% tax imposed on companies in Israel, due to its innovative efforts which entitled net debt to pay taxes under beneficial tax directs.

We will continue to accrue tax expenses during the year and first payments of these expenses to the tax authorities as expected throughout the year.

As a result of the above, net profit for the first quarter of 2024 was $1.4 million, or $0.02 basic profit per ordinary share, which equal $0.23 basic fare American Depositary Share ADS, compared to IFRS net loss of $0.7 million in the first quarter of 2023 or $0.02 basic loss per ordinary share, which or $0.21 basic loss per ADS.

Non-IFRS net profit for the quarter was $2.8 million or $0.04 of basic profit per ordinary share, which is $0.45 basic profit per ADS compared to a non-IFRS net loss of $0.1 million in the first quarter of 2023, practically close to $0 basic loss per ordinary share or $0.03 basic loss per ADS.

As of March 31, 2024, shareholders' equity totaled $17.1 million or approximately $2.66 per ADS compared to shareholders' equity of $13.2 million as of December 31, 2023.

The increase stems from the 2024 first quarter net profit as well as warrants and options exercises.

As of March 31, 2024, the company's cash and cash equivalents balance totaled $15.1 million compared to $10.9 million as of December 31, 2023.

And lastly, I wanted to touch base on our share count as it stands today.

On an outstanding basis, we have around 64.3 million ordinary shares, representing approximately 6.4 million ADSs.

On a fully diluted basis, we currently have around 78.2 million shares, only approximately 7.8 million ADSs outstanding.

With that, I turn the call back over to Shachar.

Thanks, Shai.

Alongside our ongoing business activities and our efforts to support our growth, we continuously planning for the future and advancing our roadmap towards potential solutions for data analysis and insights.

Similar to our latest strategic decisions we've taken in the past two years that have proven to be very successful, we invest many resources in choosing the right path for us when it comes to the next generation of our data collection solutions and offerings.

For that end we establish a special in-house committee, which includes Yorai Fainmesser, recently appointed a Strategic Advisory Board member, as a general quality of a leading AI venture capital, disruptive AI and the former colonel head of the AI and data science intelligence unit of the Israeli Defense Forces.

Mr. Fainmesser being unparalleled expertise in AI strategy and cyber technology.

We are excited about the progress we have made in the last few months in our strategic plans and looking forward to update our investors regarding these plans for the future.

All our business plans will keep serving our main goal of presenting solid revenue growth and profitability.

Operator, please go ahead.

(Operator Instructions)

Kris Tuttle, Caterpillar investments.

Hey, guys, thanks for taking my question.

Another great execution period.

Couple of quick ones on housekeeping and then I may circle back.

So I understand the adjustment in the finance charges for the warrant.

Can you give us what do you expect the kind of run rate number to be on that line, given your cash and whatever interest rate you're getting, if you back out the one-off warrant adjustments number.

Okay.

So first of all, thanks for the compliment, but I am really sorry.

Can you sharp your question, what is the run rate of what?

Your line with the finance cost, which was affected by the warrant, adjustment.

Okay.

You are talking about the non-cash expenses that impacted our IFRS net profit?

Yes, that's correct.

But specifically, if you look at the finance expense line on the profit loss statement, it was a negative -- it was $848,000.

And what would that be if you did not have the warrant, adjustment in that particular number.

I understand.

Okay.

Shai, you want to take it.

Yes, of course, if we would just take it out and then you should just subscribe around $800,000 from the current figure.

So approximately, it will be around zero.

Now by the IFRS net profit would be $2.2 million without this

--

This $800,000 sales would be added back to our net profit and would become $2.2 million instead of $1.4 million.

Okay.

And then related to that, given your cash balance, should you be earning pretty good interest on that to create a positive variance there in finance.

Shai?

Yes, we are creating some interest on our deposits, on the other end there are other ingredients that affect the finance expenses or interest line like this. -- (multiple speakers) currency differences between dollars and US -- dollar and shekel and also we have some interest expenses relating to our strategic funding that are still on balance sheet.

Under the liabilities, it is around $1 million.

So it still carries some interest, so the combination of all of these is deducted some of the interest income we had on our deposits.

But as long as we continue to increase our cash balances.

Then in these cases, we do expect to see other than these fluctuations in the warrants, but we do expect to see some interest income going forward.

Okay.

All right.

Thank you.

And then a couple quick ones here.

The tax -- your favorable tax rate, does that have a period of time associated with it, in terms of number of years or is it indefinite year 12% versus 23%?

As long as we know, meet all the conditions for this beneficial tax drag, it is indefinite and these conditions we do believe that we will continue to meet them.

The most important definitions are basically regarding R&D, it's the number of R&D employees as a percentage of the total employees and the amount of R&D expenses as a percentage of the revenues.

As long as we continue to be innovative and increase our efforts in development, then we don't see any issues to maintain this to be in this beneficial truck and maintain these beneficial tax rates.

Okay, excellent.

Thank you.

And last housekeeping question.

Can you remind us what is the differential between your 64.3 million share count and the 78.2 million fully diluted, what's the delta there?

That's the big part of it anyway.

Okay.

It's scope out of mainly of two type of warrants.

One is warrants to investors from various rounds in the past and also from the September 2023 round.

And the other part is of just options and RSUs to employees.

Okay.

And then on the last question, which I think will be of general interest to people is.

I'd love to know more about how you're getting your observations on, how your customers are responding to some of the new products that you guys are working on the anti-blocker and some of your data, [some of the advances and your data] with a net retention rate of 166%, it's a -- your existing customers are clearly ramping their involvement with you.

So I'd love to hear more about what you're observing in terms of your customers and your go-to-market and you with your current and your new products, and then all pass the baton to the next questioner.

Okay.

Thank you very much.

So as I mentioned in my page, so this year we launched our major product with this Website Unblocker, already in the first day we had our beta customers basically got the product in order to be a kind of a partner with us in testing the product in its initial stage and they expressed high levels of satisfaction and most of them convert this kind of a testing stage through production stage and acquired subscribed to this product.

So of course, it's a product in ongoing development.

We are developing and improving, we release the first version and of course, we have [virtually] every few weeks advanced revisions, we say more features and capabilities.

Of course, some of them saw come from the market from the feedback that we get from our customers, but I'm so happy you proudly high level of satisfaction.

Customers are testing this product versus our competitor products and see some KPIs that are significantly better and know these guys know the technical KPIs, but in high-level.

So basically and as I mentioned, we are working around the clock for our next major product, which is our AI [great bill collector].

In a few months it can eight of the -- sorry, the end of this year or early in the beginning of next year, we will release our first version of this AI scraper with own is upside and advantages, and we look forward also to get an excitement for the market.

And so basically, we just started with the new products and of course, our major product, the IPPN, it is going very well.

As you see in the gross retention rate the NRR, et cetera.

Hope it answer your question.

Thanks very much, guys.

Appreciate it.

Thank you very much.

Appreciate your time.

[Tao Jacob, Epsilon Tau.]

Hi.

First, I want to congratulate you for the recent excellent results.

Your strategic decisions have played a significant role in this success.

I have few questions about the results and the new products that you will launch soon.

We see robust customer base and usage increases from quarter to quarter.

However, your current service requires further development and additional functionality from the customer side, which the AI data collector may reduce.

So my first question, how do you foresee the impact of the new way that AI data collect on your customers and its potential to expand to your customer base?

My second question is, do you observe any demand from the current customers that willing to adopt the service.

Okay.

Thank you.

First of all, again, thanks for the compliments.

So for a second let's organize the data, okay.

I think that you really very confused about two products.

So I will organize your thoughts.

Our current product, major product, which most of our revenues coming from is our hybrid proxy network.

This hybrid proxy network is not related to the AI Scraper and to capabilities of their Scraper to reduce manual work and do everything automatically.

Our current product does not require nothing from our customers and besides to just subscribe to our cloud and to start well, what we mentioned is that today the market of the Scrapers, most of the Scraper, so all the Scraper that we are aware of.

Our requiring manual adjustments to websites and data sources from the customer side or from the vendor side, meaning to invest professional services, a new man hours in order to make the product a more robust and to free to the market needs.

Our product, our planned product, our future product there is greater and the intelligence capabilities of this product will come to expressed by these product incentive will be able to adjusting service to almost every website to the structure of the landing page or the relevant pages in the website and also to adjusting sales to new versions of revisions that each [app] is uploading once in a two-week period, et cetera.

And by this main advantages will be one, is really very fast.

Customer does not need to wait for professional services.

We don't want professional services, our -- we're trying to do everything as automatic as possible without any human being involved.

And second, we will have a huge variety of Scraper and which, of course, will leverage us so much more opportunity versus our customers.

Hope now it make more sense for you.

Yeah.

Thank you.

Just to make it clear, I point in my question regarding the Scraper.

So currently, do you see any demand for the AI data collector from these type of customers.

No, because it's not that we feel or do not see this AI Scraper is in the middle of the development stage, meaning we didn't start even to approach our customers or new customers or current customers.

We are not trying yet marketing and sales, and we have our own timeline and the time will come, as I mentioned in the end of this year in the beginning of next year, we will start to organize, as always, with our first data customers and then go to the big market and start to push it with marketing and sales activities.

I see.

Thank you and good luck with this.

My last question is regarding the fact that you all are a profitable software as a service company that generate high cash flow, how do you intend to allocate that cash?

Okay.

So basically, as I mentioned also in my speech, besides pushing our operation and new products and then audit and those the financial indicators.

Alongside with some strategic internal committees, with some experts that joined us external like advisory board members and others in order to research and investigate what will be our next generation of data collection more in this space of data insights and data analysis, meaning not only to provide this data or the best data for our customers, but also to analyze the data and to provide insights from this data.

So what we think now it's part of our cash in the future will be allocated for the

[offers].

It can be by internal development, it can be by kind of M&A, company of just the assets or a combination of both.

So we don't have a specific -- now target for this cash, and we guess that in the future we have so many options and this market is so exciting and so many identities with our hundreds of customers and we feel that we have a great space to provide the products and technologies and that we get an immediate demand of satisfied customers basically now using our platform and the products.

Yeah, I see.

First of all, good luck, I understand from your answer that in the short term, you intend to invest the current cash into new products that will allow the customer analyze the

-- (multiple speakers).

No, again, I don't have any plan to invest this cash because we are profitable, as you say, even very impressive profitability.

And in order to invest this cash, of course, you're going to invest

--

I meant internally in development.

Also not internally because in order to invest cash from your bank.

So the first thing is you need to lose money, otherwise you don't need to use this cash, you can use your profit.

So basically, we are using our profits now and as you said it's after this use of our profits, these are the results.

Maybe in the future I know that you all would do something big, opened a new division, make an M&A, something that you are for the short term.

We don't have any further plans to use this cash.

Okay.

Thank you, very much.

Good luck.

You're welcome.

Thank you.

Brian Kinstlinger, Alliance Global Partners.

Hi, great.

Thanks for taking my questions.

Nice results.

I'm wondering if you guys have an active user account you can provide for the first quarter and how that compared to last year for the continuing operation, I think it's kind of relevant now for the new business.

You mean customers count?

Yeah.

What the installed base?

How many customers do you have and how many did you have a year ago?

Okay.

So we have some ways that we are measuring internally our customers base.

In some of the measurements we do not count small customers that are less than something.

And in some others, we are measuring and we are now working by the way, Brian, on some new KPI that we will present to the market maybe in the next quarter, also related to, of course, retention churn amount of customers from quarter to quarter.

I don't have this formally, so I don't want to mislead now because we are really investigating it.

But I can tell you that we almost doubled the amount of customers said this quarter comparing to the previous quarter last year.

Got it.

Okay.

Look, I think the customer count will be great and either billings or bookings of some kind on an annual run rate, if you're considering KPIs or to that I would provide.

Anyway

--

No.

Your net retention rate was 1.66, obviously, that's very high.

What's driving this, is it more volume for collection?

Is it new cross-selling, which I don't think so because your new products are contributing yet -- (multiple speakers) it help to understand.

Sorry, gone.

So it's both.

Okay.

First of all, it's a [churn] rate is low.

When I'm talking about churn is not only about lost customers.

We measure churn, as most of our customers are walking by bandwidth, okay.

So they can use less.

So it's a kind of a churn, okay.

So the churn rate that is used in a very good place.

And we see a significant amount of up-sales, cross-sales and up-sales volumes.

Customers, sometimes -- some of our customers when they are starting with us, some of our customers are working in parallel with few vendors for high availability to a new suite to have the to leverage negotiation on pricing, et cetera.

Many reasons behind.

But so there are some of them are starting to work with us in a low-volume testing the product.

And when they see the performance and the it goes very well because we've dramatically improved our infrastructure and IPs in the every quarter.

So they are starting to transfer volume from other vendors to our products.

And then you see the volume is going up every month and it's basically it's an up-sale here.

So it's a combination of up-sales, meaning volume, as you mentioned, and the greater churn rate.

Got it.

So it's outside of churn, essentially you're saying on performance they're asking you to collect more -- you're delivering more data.

Our data collection to your customer base more and more every quarter.

Yeah.

Yeah.

Okay.

And then we've never really discussed this maybe you can touch on which industries are you seeing the most demand, technology with AI, financial services health care, where are the biggest pieces of demand, biggest clusters demand for your products?

Okay.

So it's e-commerce, always is in a good place.

You know, e-commerce is very stable, yeah, of course, our previous here and there.

But basically it's a great vertical.

As I mentioned in my speech, we see an increasing demand from all the intelligence businesses that are analyzing data for kind of AI companies that are analyzing data for their customers.

And of course, they need to collect the data to stay up to date, to motors, et cetera.

As the advertising companies always also a stable vertical.

And the last few months, we see an increased demand of people data, companies that need data in order to investigate, if it's from HR perspective or other but it's -- I cannot say that there is something it's very -- it's changing, which is good for us because then we are not relying only on one vertical.

So we see the trend here and there every quarter every month, but basically higher level these are the major trends that I see.

Got it, great.

And then in terms of AI data collector, just to make sure I understand, is this an up-sell from your IP proxy or is it a completely new customer?

I'm just trying to understand if this is new functionality for someone who's already using your product, I couldn't understand from your last answer.

Thank you.

Okay.

I will explain.

First of all, it's not an up-sell for sure.

Okay.

It's not a new feature in our product.

We have some plans to consolidate there will fare, but it's the plans for the next year to do something it can be a game changer, but let's keep it aside for a second.

Basically, it's not an up-sell because customers that are using our IP proxy network product and they need it.

Some of them are collecting data with Scraper, some of them are doing it wider field.

So it's a cross-sell because basically a customer that is using our IP proxy for that is basically as a high level of interesting data.

In order to collect data proxy is not enough you need to have greater collector product that will help you now.

I gave you the key to the room, but now we are not, you need to collect from thousands of pages in this.

So that website, the relevant data for you and basically to move it from unstructured and structured data by adjacent file, for example, in order to upload to your algorithm or data analysis products.

So these customers, it might be very relevant for them.

And of course, new customers that do not need the IP proxy because they don't need so many data and they are using only Scraper or volatile.

So I see here and there but to your question, it's not a new feature or a nature -- by nature up-sell or sure not up-sell, it's a cross-sell.

Okay.

And then in terms of the unblock.

Last quarter, you said that would be out of data in the third quarter I think.

I'm trying to understand from the press release in your discussions, is it readily available for sale now or is it still

-- (multiple speakers)

Yes, on the first week, one or two days after we launched, let's call it the general availability version.

Okay, [GI] the projects -- the production version.

And we successfully already engaged with a few customers that they waited for this product and we get an amazing feedbacks and we are marketing it now.

We did an amazing webinar last month, a lot of customers came from this webinar about this product and it's available.

Yeah.

Now in terms of sustaining the growth rate, what do you need in terms of investing in sales and marketing, you need more direct salespeople, more partners.

What does the company have to do as you get larger, it's harder to grow as fast sometimes.

What do you need to do in order to sustain growth from sales and marketing standpoint?

Okay.

So basically, Brain, I will answer you are very, you know, going to answer.

We have our own formula, but basically where -- the steps and what you need for every step for every step of revenues or something like this, but if you bring more sense, then you need more marketing and you need more presales and support and some R&D and in order to support the highest amount of customers and revenues.

So it's not one thing, and of course, you need to increase your network and the global coverage, more servers, more IP addresses, et cetera, so it goes all together.

So it's one package, you cannot take only one pillar of the company and push it forward because then you might damage your prime customers, the quality of your service, et cetera.

So nothing specific.

Okay.

All right.

And lastly, Shai, two questions.

The first is, do we assume that 12% tax rate for the foreseeable future anyway.

And then second question, I didn't quite understand your answer and what should we expect just on interest on your cash, should we expect you're going to generate interest or should we not have a little bit confused?

Thanks.

Okay, for your first question regarding the tax, yes, we can expect to maintain the beneficial tax rate of 12%, as long as the company continues to invest in R&D.

If we invest in R&D, then our metrics for the purpose of this beneficial tax rate will remain high, and we will be eligible to get this low rates.

So I hope this answers.

Yep.

Okay.

Regarding the second question, so if we take out those non-cash expenses resulting from the warrants, then we have several ingredients within the finance line.

The most important one is, of course, interest of deposits.

And yes, we do have interest on the deposits, of course, not on all our cash because some of the cash is used daily for operations, but of the larger part of it, and we get nice interest on it.

On the other side, there are some ingredients that deduct these interest income, it can be -- first of all, we still have in our balance sheet.

The strategic loan we received two years ago, we repaid based on the actual income we get for CyberKick sales and the other part of it is the of course, the interest expense we pay on this loan.

So the interest is lower than the revenues we get from the CyberKick part and it's only a few thousand -- tens of thousands of dollars for quarter, but it's still being deducted from the interest income.

And also you have bank commissions with other ingredients.

So all of it created for us only (technical difficulty) around zero interest income.

But going forward, since we do expect or hope to increase our cash balances and on the other hand the lone, we repaid so the interest should be lower, the interest expenses should be lower.

Then we do expect do see some interest income in our P&L.

And it's all relatively low figures, it's not millions, it's all we're talking about tens of thousands of dollars, maybe $100,000 to $200,000 of interest, but this is the [ballpark] it's not revenues.

Okay.

Thanks for your responses.

Thank you, Brian.

Sean Sweeney, SThree capital.

I do quick comments, guys.

Congratulations on the quarter.

And secondly, I think we're all Googling up.

Keep trying to figure out how we can get 12% tax rate in our business also.

And I think that's a big one.

Touching on the IFRS and the non-IFRS, can you touch a little bit more depth on that?

And at the same time when these warrants expired '25, will that be a net cash benefit on that quarter?

Okay.

So I would expand and Shai, feel free to comment.

So I would explain, I'll do it shorter by your permission because we discussed about a few times, but just to make the point very clear.

So yes, it's ridiculous, but sometimes you lose something when the share is going up significantly in the share price in the these quarter in about a $12 from January 1 to the end of March.

And due to this the evaluation of our old warrants for a 2019 and 2020 from different base of the company.

Of course, their valuations went up because they are now closer to access as prices closer to the share price.

And for this, we should -- of course, it's all non-cash, but IFRS is non-cash.

So we should book a record an expense of $800,000.

So I hope it answers your first question.

Your second question is about what happened if the warrants are -- when they warrants are expire next year.

So Shai, wanted to advise what's the financial situation in this case?

First of all, after the exploration, there will be no expenses, neither income, there can be also income.

If the share price goes down, then we will create income.

So we do prefer this expense rather than this income.

But when they expire there will be afterwards, of course, no interest at all, no expense, no income.

And if there will be exercise action, does do nothing to our financials.

It's only the share price compared to the exercise price, and that's.

And that's all.

And then after also there will not have any impact anymore, not expenses, not financial expenses, it's like the

[expire saying].

So I just want to summarize this, the share price will continue to go up.

We'll continue to see more expensive until the warrants will be expired or exercised.

It doesn't matter, if the share price go down, then we will see income.

Does this answer your question?

Yes.

Perfectly, Thank you.

Thank you, very much.

Mark Gomes, Pipeline.

Gentlemen, on another great quarter.

Wondering how if the business trends are continuing in this quarter.

You made some comment on that last quarter about how January, February were going.

And then any commentary further regarding what we might be able to expect in terms of how pricing can have the new products can affect your revenues as well?

Thank you.

Okay.

So first of all, I do mention that also this time in the first (technical difficulty) later, you can go back to the transcript, the record, you will hear that I said in the beginning of call, I mentioned that this trend of all the financial impact financially.

So KPI's improvements revenues and profitability and others.

These positive trends are continuing with us to the second quarter.

So basically, according for today the answer is yes.

Second, regarding the new product.

So I think I mentioned this a few times, but I will say it again because I want this point to be very clear.

We just started, we are in a very happy about it, but our main product is in the high number.

And the new products is now need to start in your own kick-off and get into production and scale mode.

So we are pushing them because you have a huge believe also in the innovation.

And by the way, they will bring us more customers also to outbound product, but a significant impact on the revenues from this product, I don't see this year.

Again, if you have $4 million or $5 million company annual revenue, I would say yes, but due to the effect that you see that we have on [laminate], if you take this 8.4 and the four times, so to make an annual run rate.

So significant impact on this one way, we are not there yet.

Great.

Thanks again.

You're welcome.

Thank you.

We have reached the end of our question and answer session.

I would now like to turn the floor back over to Shachar Daniel, for closing remarks.

Okay.

So thank you.

Thanks, everybody, for joining the call and being part of our journey.

And we look forward to continue to update you on our progress.

Thank you, very much.

Thank you.

This does conclude today's teleconference.

We appreciate your participation.

You may disconnect your lines at this time, enjoy the rest of your day.